Monday, November 19, 2018

Mumbai: A deal to acquire Jet Airways may be in the making, now that Tata Sons has clarified that it is holding preliminary discussions with Jet Airways for a possible investment in one of India’s once-high-flying airlines.

Analysts expect an open offer from the Tatas shortly, maybe as early as Monday. They added that Jet Airways founder and chairman Naresh Goyal — who holds 51% — may have to exit completely to allow the Tatas and their partner Singapore Airlines (SIA), a free hand to run the airline or merge it with Vistara.

“No one can have a free ride with the Tatas. They would like to have full control of Jet. In the Jaguar Land Rover deal, they did not allow Ford to keep a minority stake of 5%. Going by this example, Mr. Goyal needs to exit,” said Mark Martin, CEO, Martin Consulting.

“The Tatas admitting that discussions were at a preliminary stage is enough indication that they are keen on this deal and they must have completed due diligence. An open offer for Jet is likely any time from Monday to Christmas,” Mr. Martin said.

He said, “While the Tatas will lead the investment, SIA will put it to shape. It will be the most aggressive comeback of [the] Tatas in aviation.” Going by past experience, the Tatas will move swiftly to close the deal.

In August 2012, they had denied to The Hindu any possible re-entry into the airline business, but announced two airline JVs (AirAsia India with AirAsia Bhd and Vistara with Singapore Airlines) within months.
Analysts said Jet had run up ₹8,052 crore in debt as of September 2018, but “it is a good buy” considering the “soft and hard assets” it has.

Its cost structure may be seen as a disadvantage; it has an order pipeline of 225 Boeing 737 Max planes, a large maintenance facility in Mumbai, an army of traditional travel agents and a workforce of over 16,000 employees.

Currently it operates 124 aircraft, including 16 that it owns. “The Tatas are getting a very good asset at a very good price,” Mr. Martin said.
18/11/18 Lalatendu Mishra/The Hindu